Emerging-Market Outflows Top $11 Billion as Cash Sent to Europe

Feb. 27 (Bloomberg) -- Investors are stepping up withdrawals from emerging-market exchange-traded funds and shifting into Europe as concern mounts that growth is faltering in developing nations while advanced economies strengthen.

Withdrawals from U.S.-based ETFs investing in emerging- market equities and bonds totaled $11.3 billion this year, already surpassing the redemption of $8.8 billion for the whole 2013, according to data compiled by Bloomberg. Funds investing in European assets added $5 billion in the first two months of 2014, compared with $18 billion full-year inflows in 2013.

Returns in emerging-market stocks this year are trailing their European peers the most since 2011 as China’s economy slowed, currencies from Turkey to South Africa tumbled while violent protests in Ukraine fueled geopolitical tension. In Europe, economic confidence increased for a ninth month in January, suggesting the scars from the ravages of the sovereign- debt crisis in 2011 are healing.

“What you see is the transition of funds from emerging to developed markets,” Scott Rodes, a money manager at Bahl & Gaynor Inc., who helps oversee $11 billion, said by phone from Cincinnati today. “Investors view Europe as a safe place. The fundamentals are going to be challenging for the emerging markets for at least six months.”

--Editors: Rita Nazareth, Tal Barak Harif

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Elena Popina in New York at epopina@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net